[p2p-research] what to think of the market

Paul D. Fernhout pdfernhout at kurtz-fernhout.com
Thu Aug 6 19:38:17 CEST 2009

Michel Bauwens wrote:
> There is nothing natural about it, and so far, it hasn't worked. What makes
> you think it will work in the future? or more positive, what are the
> conditions that need to occur to see your ideal emerge in practical reality?
> You have only to look at the current swings in oil prices to see the
> mechanisms are not working. I think less and less people will have blind
> faith in the market and ignore the other mechanisms that need to be in
> place. Why are governments worldwide purchasing huge land for agricultural
> production, if they have a believe that the 'food market' would 'naturally'
> solve their problems?

Just to focus a bit more on this one section.

As I've repeatedly said, the market may be great at creating wealth, but it 
has both positive and negative externalities, and it also tends to 
centralize wealth (leaving the needs of the poor unmet). One of the negative 
externalities the market ignores is any sort of systematic risk (like market 
collapse). Another negative externality ignores is the cost of defense of 
non-intrinsically secure infrastructure or supply regions. A positive 
externality the market often ignores is global human nutritional health and 
how that makes the planet as a whole much happier and safer.

For these reasons, I consider it reasonable for a government to intervene in 
the market in various ways, to regulate or fine for negative externalities, 
to subsidize positive externalities (like intrinsically safer local energy 
production), and to tax to redirect wealth towards the edges (so everyone's 
needs are heard in the market).

To be clear, long term I feel the  market will be less and less important as 
we get more and better means of local production like 3D printers, but even 
then, there are some currently constrained resources we might allocate in 
some way (land, some mineral rights, fishing rights, etc.).

You have identified above a negative externality in the market structure, it 
that wildly fluctuation oil prices, in part due to speculators, is making it 
hard for people to plan for a post-Peak Oil future, which is essential to 
prevent civil unrest. You did not mention it there (but elsewhere), but 
fossil fuel use causes pollution (both CO2 causing global climate change and 
other types like mercury from coal). Also, the way our fossil fuel use 
happens now (very centralized) has a corrosive effect on our democratic 
politics. Also, a huge amount of defense spending is related to "defending" 
"our" oil supplies from the Middle East and elsewhere (some estimates put 
the cost per barrel of defense at US$200). So, for all these reasons, it is 
reasonable to impose some sort of tax on oil, as well as a tax on coal and 
natural gas.

There is the notion of a "carbon tax" but that is mainly about pollution.

It would seem more reasonable for a more general fossil fuel tax, one which 
provides a floor for costs, both to recoup national defense costs and to 
make planning easier. So, in addition to other taxes on fuels, there could 
be a floor tax that keeps coal, oil, and natural gas at a minimum equivalent 
amount of US$200 a barrel of oil, although there might be other taxes too, 
or this tax might be just a flat tax, or a high floor as a floating tax. 
(Other people have proposed this already.)

The USA uses about 20 million barrels a day of oil.
Or so about a billion barrels a year. Let's say we just add a $200 a barrel 
tax on oil. And we would do something similar for coal and natural gas, on a 
carbon emission and/or BTU basis. So, at US$200 a barrel for oil, that would 
be about $200 billion dollars in tax revenues annually. I'm not sure off 
hand from coal or natural gas how much to tax, but probably similar amounts.

What to do with all this money? Well, many people would have to pay for more 
gasoline, electricity, home heating, plastics, and so on. So, let's give the 
money back to the people as a basic income, on an egalitarian equal basis. 
So, for just oil, that would be, in round figures, about $750 a person in 
the USA. So, just give them all checks or a special oil money debit card.(*)

Now, what is the point of the tax if the money just goes back to the people? 
Well, the first thing is, it is an egalitarian progressive tax, so people 
who are poor or use less oil would be better off. Secondly, the market can 
now work its magic.

How does the market magic work now? Well, suddenly fuel efficient cars make 
a lot of sense. It would make sense for people to produce biodiesel from 
algae. It would make sense for people to insulate their homes to use less 
fuel. It would make sense for the US Midwest to switch from burning coal to 
using wind and solar (and stop polluting our local lakes, thank you). And so 

Over time, the tax revenues would fall, but the "sinful" business of oil 
would be at an end, replaced with (presumably) sustainable alternatives. And 
the environment would be cleaner, and everyone would benefit from that (even 
the fish and amphibians). So, this is really a sin tax, but without the 
money going to the government, but going to the people who are sinning, in 
proportion to their virtue. :-)

To avoid a sudden shock, maybe this US$200 a barrel tax (and other fossil 
fuel tax) could be phased in over three years -- but I'd be all for just 
doing it all at once, just to avoid surprises. :-) It would take some solid 
political will to pass it, and more political will so everyone knew the 
government was going to keep this tax for a long, long time, so people could 
plan around it.

Europe has long had higher taxes on oil use, and so Europe is already doing 
this to some extent, and has much better energy efficiency in general per 
unit of GDP than the USA.

Now, if I can propose such a simple way to solve the Peak Oil crisis, one 
that is egalitarian and trivially implementable in terms of policy (even if 
it would face huge political hurdles from vested interests), then how do we 
have a resource crisis in relation to fossil fuel use? We don't. We have a 
political crisis of special interests who have privatized profits while 
socializing costs like pollution (and socializing other risks like war and 
social unrest).

So, the problem of Peak Oil is purely social, from my perspective as a 
technologist, given the existence of existing technology solutions plus many 
more in the sustainability pipeline. :-)

Food might need a different approach, but again, one needs to identify the 
externalities and inequities and then construct a tax policy around them. 
Here is a "honest food guide" where you could tax more on items to the left 
in the red, and subsidize items on the right in the green, as well as give a 
basic income to all to afford to eat:
One could also look at soil erosion and water use and then tax products 
based on those, too.

Still, in the long term, I think all this taxing business will fade away as 
we get wealthier people who engage in more local production using local 
resources (local capital as it was) and build up a gift economy around 
various commons. But these are policies we could implement today.

--Paul Fernhout

(*) Or, as I proposed elsewhere, we could eliminate all the banks and let 
the Social Security administration run currency transfers given we have no 
privacy anymore in banking transactions anyway, and the big banks were 
already effectively socialized:
   "A modest proposal for transitioning the USA to a post-scarcity paradigm"

More information about the p2presearch mailing list